Top Banner

of 34

BCG matrix

Mar 08, 2016

Download

Documents

SaurabGhimire

This is the detail about the bostan consulting group matrix.
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
  • Types of Portfolio AnalysisGrowth Share Matrix (Boston Consulting Group)Industry Attractiveness/Business Position Matrix (General Electric)Hofers product market evolution matrix

  • Growth Share Matrix (Boston Consulting Group)

    Classification of SBUs/products into four cell matrix based onMarket AttractivenessIndicator Industrys annual growth rate10% traditional cutoffBusiness StrengthIndicator Companys Market Share Relative to Largest Competitor

  • The Boston Consulting Groups Growth-Share Matrix

  • Star StrategiesLeader expanding industryGenerates large profitsRequires substantial investments to sustain growthFarthest down on experience curve relative to competitionIncrease sales e.g. new markets, new channels of distributionIncrease market share

  • Problem Child or ?Low market share in expanding industryNeeds substantial cash to improve its positionSlow progress on experience curveIncrease sales (limit to niche or increase market share (limit to niche)Leave market

  • Cash CowLeader in mature or declining industryCan generate funds for other SBUsMaintain market share e.g. ensure quality, build customer loyalty, develop substitute brandsMaximize Cash Flow e.g. increase usage rate, rate of replacement, modify expense structure, raise prices

  • DogsLow market share in a mature or declining industrySlow progress on experience curveCost disadvantages and few growth opportunitiesHarvest or DivestConcentrate on niches requiring limited effort

  • The Boston Consulting Groups Growth-Share Matrix

  • Strategy Implications BCGStar Leader in Expanding IndustryBUILD - Continue to increase market share if necessary at expense of short-term earningsProblem Child Low market share in Expanding IndustryHARVEST if weak, BUILD if strong.Assess chances of dominating segment. If good, go after share. If bad, redefine business or withdraw.

  • Strategy Implications BCGCash Cow Leader in mature or declining industryHOLD - Maintain share and cost leadership until further investment becomes marginalMaximize cash flowDogs Low market share in a mature or declining industryDIVEST Plan an orderly withdrawal so as to maximize cash flow or concentrate on niches that require limited effort

  • Assumptions of Growth /Share MatrixHigh market share generates cash revenues ?High Market growth uses more cash resources ?

  • Issues with Growth/Share MatrixMarket growth is not the only factor related to cash usage.Market growth is not necessarily related to cash usage.Market share is not necessarily related cash generation.Multiple factors lead to profitability.Cash is not the only factor in evaluating a portfolio.

  • Issues With Growth/Share MatrixLimited to industries where experience curve is relevantAppropriate for volume industriesOverlooks perils of growthMeasurement problemsProduct-market definition problemsDifficult to implement strategies

  • GE-McKinsey 9-Box Matrix

  • GE-McKinsey 9-Box Matrix

  • GE-McKinsey 9-Box Matrix

  • MAIN ACTIONSGE-McKinsey 9-Box Matrix

  • DETAILED EXPLANATIONGE-McKinsey 9-Box Matrix

  • GE-McKinsey 9-Box Matrix

  • Hofers Product Market Matrix

  • Product Market Evolution Matrix displays thematrix where strategic business units are graphically represented according to twobasic indicators:Competitive position on the market stage corresponding to the product/market evolution.

  • Charles W. Hofer described seven stages of the life cycle, each with certain characteristics by which the position of the market can be identified.

    DEVELOPMENT GROWTH SHAKE-OUTMATURITYDECLINEPETRIFICATION

  • Business unit A It would to be a developing winner. Its relatively large share of the market combined with its being at the development stage of product- market evolution and its potential for being in a strong competitive position make it a good candidate for receiving more corporate resources. Business unit B It is somewhat similar to A. However, it has a relatively small share of the market given its strong competitive position. A strategy would have to be developed to overcome this low market share in order to justify more investments.

  • Business unit CIt might be classified as a potential loser. A strategy must be developed to overcome the low market share and weak competitive position in order to justify future investments.

    Business unit D It is in a shakeout period, has a relatively large share of the market, and is in a relatively strong position. Investment should be made to maintain that position.

  • Business units E and F They have relatively large market share and has strong competitive position. It should be used for cash generation.

    Business unit G It has low market share and weak competitive position. It should be managed to generate cash in the short run, if possible; however, the long-run strategy will more the likely be divestment or liquidation.

  • STRENGHTSSet objective and allocate resourcesUse of externally oriented dataCash flow availabilityGraphical communication of business mixIdentify developing winnersIllustrates distribution of business in an industryEncourages promotion of competitive analysisSelective earmarking of financial resourcesReduce risks, increases concentration and involvement in competitive world.

  • WEAKNESSDifficulty in defining product/market segment.Suggests impractical standard strategies.Naively following portfolio prescriptions may reduce profit.Provides an illusion of scientific rigor.No clear idea what makes an industry attractive .

  • The power of the Hofer matrix resides in the fact that it may outline the distribution of strategic businessunits during stages specific to life cycle of the market.Similar to the McKinsey matrix, the present matrixoffers the company the possibility to make a diagnosisregarding the portfolio, in order to establish if it exhibitsa balanced or unbalanced structure.

    A balanced portfolio should be composed ofstrategic business units of the type corresponding to Stars and to Cash Cows and to a few QuestionMarks, which have recently penetrated the market or which are about to become Stars.

  • *************